Suburban hotel headed back to lenders

(Crain’s) — The five-year-old Westin Chicago North Shore hotel in Wheeling is going back to its lenders.

The lenders on Thursday made a $63-million credit bid at a court-ordered auction of the upscale 412-room hotel, says John Weiss, a Chicago-based partner with law firm Duane Morris LLP who represents the lenders’ agent. There were no other bids for the property.

The hotel at 601 N. Milwaukee Ave. was developed in 2006 by a venture of Oak Brook-based Harp Group Inc., which cashed out most of its stake a year later when it refinanced the property with a $15-million investment from New York-based Marathon Asset Management LLC and the $86-million loan from J. P. Morgan Chase & Co.

New York-based J. P. Morgan then divided the loan into three parts: a $37.1-million senior note that it sold in a commercial mortgage-backed securities (CMBS) offering; a $24.9-million junior note held by Oak Brook-based Inland American Real Estate Trust Inc., and the lowest-ranking $24-million piece, owned by Stamford, Conn.-based Five Mile Capital Partners LLC.

The hotel was appraised at $110 million in May 2007, around the time it was refinanced, but the value plummeted afterward, and in March 2010 the property was appraised at just $51.2 million, according to a loan report by Bloomberg L.P.

The lenders sued to foreclose in Cook County Circuit Court in May 2010, alleging that the hotel owners had stopped making their monthly debt-service payments in January 2010.

Duane Morris’ Mr. Weiss says the lenders are likely to take title officially in three to four weeks and that he’s not familiar with their plans at that point. Presumably, they will put the property up for sale.